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Is it Better to Make Repairs Directly vs. Offering a Credit to the Buyer?

Is it Better to Make Repairs Directly vs. Offering a Credit to the Buyer? Sometimes a buyer’s home inspection reveals problems that you, the seller, weren’t necessarily aware of. Maybe there’s a plumbing issue or the stairs on the front porch are showing signs of rot. Very often the buyer will request that you make some or all of these repairs as part of your agreement. Here are a few possible scenarios.

If the repairs requested are safety hazards, building code violations, or structural defects, you’d be advised to make the repairs. Some lenders require that these types of issues be addressed prior to releasing funds to the buyer, so not fixing them could cause your deal to fall through. Check your homeowner’s insurance to see if they might cover part of the costs leaving you with only the deductible to pay.

Another option is to offer a credit to the buyer (on closing costs, for example) so the new owner can oversee the work but doesn’t get stuck footing the bill. Offering credit can sound more attractive because you won’t have the hassle of hiring and overseeing contractors when you’re trying to pack up and get the house ready for closing. But be aware that credit is usually only offered for smaller repairs. When it comes to major contract work, such as replacing a leaky roof, credit may not be an option. Many lenders have limits to how much credit they’re willing to accept, and the appraiser may require that the work be done prior to closing.

For small cosmetic issues and normal wear and tear, you have the option to decline to make those repairs. But many problems that turn up in the home inspection fall somewhere in between “urgent safety hazard” and “petty ridiculous demands.” To fix or not to fix, that is the question. First, consider whether you’ll jeopardize the deal by not fixing them. Is it worth trying to find another buyer? Keep in mind that legitimate issues will need to be disclosed to the next potential buyer if this deal falls through (and if they’re not disclosed, the next home inspector is likely to uncover them once again). Sometimes it’s worth it just to make the repairs to keep the deal moving smoothly and on schedule.

Talk to your agent. He or she will know your negotiating position and the current market climate. Your agent should be able to give you good advice for your particular situation, which might include offering to split the cost with the buyer as a compromise. Be reasonable and hopefully the seller of your dream home will extend the same courtesy to you.